On May 31st Freeport-McMoRan Copper & Gold (NYSE:FCX) announced its completion of the acquisition of Plains Exploration & Production Company (NYSE:PXP). On June 3rd Freeport-McMoRan Copper & Gold announced the completion of the acquisition of McMoRan Exploration Company (NYSE:MMR). With the completion of these two acquisition, Freeport-McMoRan has become one of the premier U.S.-based natural resource companies in the world.
With these two acquisitions, Freeport-McMoRan added reserves in four main areas of U.S. oil and gas development. The company acquired reserves on the Gulf coast, which include the Eagle Ford Shale and Haynesville Shale, the U.S. Gulf of Mexico (offshore), California onshore and offshore and the Rocky Mountains.
Map sourced from (PXP.com)
The acquisition of these reserves should prove to be a very valuable additions for Freeport-McMoRan. As the U.S. is reducing its dependence on importing oil and gas and looking to increase domestic production over the next 7 to 10 years, acquisitions in key regions for oil and gas development will prove to be very profitable for Freeport McMoRan. The map below compares the U.S. lower 48 states shale plays with the acquisitions of Plains Exploration and McMoRan Exploration.
Chart sourced by (EIA)
Currently the U.S. is focusing on reducing its dependence on others for its oil and gas. As this is the case, this transition has created significant opportunities for many investors. The International Energy Agency (IEA) is forecasting the U.S. to become the world's largest oil producer by 2020, while the B.P. PLC's (BP) energy outlook is predicting the U.S. to be 99% self-sufficient in energy by 2030.
The Eagle Ford Shale, Gulf of Mexico, California, and the Haynesville Shale will all have major roles in the U.S. move toward oil and gas independence. The Eagle Ford Shale and Haynesville Shale located in Texas, and Lousiana, have increased production significantly over the past five years. As these regions are rich in resources they will continue to have a integral part of U.S. oil and gas independence moving forward.
Chart sources by (EIA)
With the acquisition of Plains Exploration and McMoRan Exploration, Freeport-McMoRan Copper & Gold acquired a property base in the U.S. Gulf of Mexico. The U.S. Gulf of Mexico has produced over four billion barrels of oil in the past eight years and this area remains one of the world's most prolific producing regions. According to the EIA the Gulf of Mexico federal offshore oil production accounts for 23 percent of total U.S. crude oil production and federal offshore natural gas production in the Gulf accounts for 7 percent of total U.S. dry production. This region has proven to be and will maintain its significant importance to the U.S. economy. Also stated by the EIA, the U.S. Gulf Of Mexico will have the second-highest production increase over the next eight years only behind tight oil.
As of December 31, 2012, Plains Exploration had an estimated proved reserves of 440.4 million barrels of oil equivalent (BOE) of which 82% was comprised of oil and 63% was proved developed. According to the company's 2012 10-K Plains Exploration had total proved reserve life of approximately seven years and a proved developed reserve life of approximately four years.
With the acquisition of McMoRan Exploration, Freeport Copper & Gold acquired prospects in the shallow waters of the Gulf of Mexico and Gulf Coast area on the "ultra-deep gas play" and on the "deep gas play."
In a recent statement Freeport-McMoRan Copper & Gold's Chairman James R. Moffett said; "These transactions will enhance our portfolio of large-scale, geographically diverse natural resource assets with exceptional exploration and development characteristics. We are pleased to welcome the PXP and MMR oil and gas teams to FCX's global family and look forward to the opportunities for value creation that our expanded asset base provides for shareholders."
Richard C. Adkerson, Vice Chairman, President and Chief Executive Officer of FCX, stated; "The transaction adds a high quality portfolio of North American based oil and gas assets with strong current cash flows, a financially attractive growth profile and complementary exposure to commodities with favorable supply and demand fundamentals essential to the world's economies."
As the U.S. is reducing its dependence on importing oil and gas and looking to increase domestic production over the next seven to 10 years, the addition of McMoRan Exploration and Plains Exploration & Production will prove to be a timely and profitable group of acquisitions for Freeport-McMoRan Copper & Gold.